Did you say tax havens?

Published on 1 May 2002 - François Lille, Odile Tobner

Article published in "Mouvements" n° 21-22, "De la Françafrique à la mafiafrique", may-june-july-august 2002.

An evil joke...

In speeches, articles, brochures and statements of today, it is now considered the ‘correct thing to do’, to include the phrase “suppression of tax havens”. In the event of an oil spillage or suchlike, one will always mention the need to ban flags of convenience. The situation is also approached with an automatic desire to handle the situation outside the law, the main attraction coming from the fact that it already is.

It is easy to take pleasure in imagining places of liberty, where it is possible to forget the policeman, the customs officer and the taxman. Dreams of paradise? Nothing that we discover, particularly in Africa, can be part of these dreams. The paradise is not for bandits, pirates, poachers, smugglers or simple fugitives from the fringes of society. In our society, the outcasts are the unemployed, homeless, refugees, those without true rights; places of liberty worldwide are not for these people, and one can see little hope of their situation improving.

More elaborate critics talk of tax, financial, bank and legal havens... On top of these, we could also add mercenaries, Mafia, trafficking etc, before even looking closely at the subject. But the more that we qualify the problem, and the more the term ‘haven’ is used in negative contexts, the more it can be seen as an insult to the indirect victims of this criminal network. Nevertheless, the term is now sufficiently popular that we have to continue employing it, to make us understand.

There are now a number of studies of a different type, as well as several reports from a controversial parliamentary Commission . Through these, one discovers the expansion of these “lawless worlds”, as Jean de Maillard and 6 other magistrates described in 1998 . It is possible to analyse to what extent the simple slogans are hoaxes, before turning to the complexity and the spread of the problem. All this is not new: the first “Chambost guide on Tax Havens” which caused a sensation when published 25 years ago, is now at issue 53. It also appears that the dangerous liaisons between the financial world and grand-scale corruption are not new phenomena. Nevertheless, it is the current phase of financial globalisation that has caused the sudden acceleration in the phenomenon, involving both national and international authorities.

A booklet published by ATTAC , which unfortunately is very short, was without doubt the first publication for the general public that focussed on this phenomenon.

Why Africa?

Africa is affected more than any other continent, due to the enormous scale of embezzlement that goes on there. The scale is not only enormous relative to other countries, but is also enormous on an absolute scale. The accumulated flow of corruption North-South-North is on a completely different scale compared to, for example, trade in European interior markets (which are already on a large scale!). Impunity is also more widespread there, more sheltered from judicial blows than corruption in the North. It is not long ago that businesses could work out the kickbacks from their tax declarations. Embezzlement, diversions and concealment of funds all scream “tax havens”. But how do countries reputed as being poor and in debt, generate such flows of corruption? Where does all the money come from?

The money comes from pillaging, the ravaging of primary forests and marine reserves, from mined resources and from any other reserves that may generate profit. It also comes from the devastating control of oil societies over entire regions, as well as their regimes (the control being maintained under the pretext of ‘improving society’, despite the fact that the opposite is most usually evident). Another source is the embezzlement of profits from exportation, just like the example of vanished oil cargoes. Moreover, the most classic criminal trades - drug, but also human trafficking, to feed the demand for prostitution in our prosperous countries. Money equally comes from corruption, racketeering, and direct embezzlement of public funds by local ruling clans.

It is also the product of, as well as the means of financing, war: civil or national, overt or underground. War generates pillaging and pillaging maintains war. Warlords control mining regions; diamonds are best because they are so easily exportable. However new products such as coltan , are destabilising entire regions. Western public and private “services” are financing themselves more and more directly through the most lucrative trafficking processes, often in competition with criminal organisations. It is therefore ‘debt’ money, the horrendous fraud of ‘wasted’ money (but not ‘lost’ for everyone), and which has already been used several times to pay off new debts that only serve to increase the original. What irony to talk about poor and indebted countries! It is actually Africa’s riches that make the situation worse, instead of improving it.

In order to keep on being recycled, the flows of embezzled and diverted money need to change to become transparent/disguised, in order to work the complicated system of ‘havens’ that we will explain later on. Suitcases of money still circulate directly, but this is only the ‘loose change’ from the trade. Massive currents pass by mystical circuits, reappearing in developed countries, where it is conducive for the profits gained up to that point to grow in “transparent” accounts (usually not so transparent at all) . Sumptuous exotic domains for transnational fat cats and swindlers are simply an epiphenomenon, the cherry on the cake, for which the cake is us, the rich countries of the world.

French-speaking Africa poses a particularly bad problem, since corruption there is omnipresent. We have a significant responsibility in the present-day, just as we had in the past. What we are talking about here is “France-Africa” , which is now becoming “Mafia-Africa”. The utilisation of these lawless worlds is an essential instrument in the cycle of deterioration they are suffering.

A world of lawlessness

Let us now turn to look at the instruments of the system, and how they satisfy the multiple and varied needs of the notion we have just introduced. Tax evasion, underground transactions and legal immunity are the 3 main “virtues” that led to the further development of this already well-established multifarious activity. At the present time of globalisation, there has been a marked acceleration in the phenomenon, with national and international authorities being implicated. The expansion is accompanied by a differentiation of functions, which is still developing. There is also a notable differentiation in the clientele, which now includes criminal organisations, also participating in the process of globalisation.

These functions are served by a strange range of societies of varying sizes, who work around 4 main elements of organisation: virtual masking (covers), functional division, geographic distribution and evanescence. These are the principles, relations and elements of a mystical system that is duplicating and interconnecting existing lawful socio-economic systems. The system, which was only in its embryonic stages before, has developed progressively and has been reproducing itself for the last 50 years. It is not easy to describe however, due to its opaque and evasive nature.

It is a system of lawless worlds, or perhaps places where laws are only created to offer those with the means, the protection of misused national sovereignty. It is also the world that is now frequently referred to as “off-shore”: yet another elegant means of saying “outlaw”, yet another hoax. Such things are not rare in the history of the world, but the spread of these old marginal practices has finished by covering up a whole parallel world, one that is partly virtual. A place without any other law but the law of the place (and in which the most typically criminal of “places” succeed in introducing their own laws). The “liberal” activities can therefore begin to dominate their markets, and become the new norm for the region.

At the same time, using the same principals and real or fictional places, flags of convenience have ended up attracting or spoiling the majority of the world’s naval fleets , adding to the disappearance of national fleets that African countries had created on independence. Another “virtue” can be added to the three already mentioned: one that has been wrongly neglected for too long, a “social virtue” allowing us to exploit human work outside all the most basic laws of employment and human rights. This shadows trends seen in other continents, with the development of uncontrolled exploitation of workers (usually women) in “free zones”, already developed on a grand scale.

One step further and we arrive at the extreme application of the “off-shore principal”. Guantanamo, the US military enclave in Cuba, was the ideal place to establish “lawless” prison after 9/11. “The aforementioned, coming from a country that wants to impose its morals on the rest of the world, but wants to shamelessly evade them itself, at the same time as avoiding the laws of the world, is an extreme worry. Should we expect concentration camps in Antarctica or on Kerguelen Island?

Invulnerability...or vulnerability ?

The system has started to become independent, dominating its creators, who continue to make use of it, even though they no longer control its overall evolution. Its criminal tendencies however do not always affect the entire world. When studying official literature, meetings and declarations, one has the impression that it is attacked from all angles. But its coherence appears to be simply illusionary. It is useful to use a metaphor when analysing repression: it can be seen as organising itself as a unusual sort of ‘net’, capturing little fish and letting bigger ones go. Why? Because its main users cannot envisage themselves getting past.

- that each one of the leading states protects “his” havens, under the pretext of international competition
- that the cores of the system are major financial centres
- that its primary users are transnational companies, with financial, production, legal and criminal functions, as well as the secret services etc. of states.
- that its main operators (the primary network) are international banks and other linked services (stock exchanges, clearing houses...)
- that actual, and considered measures generally put the transaction ahead of the police, and ahead of justice: a dilemma which leads to all sorts of compromises
- that global governance, through the right (or refusal) of trade, transforms the most criminal “trade” into good trade, and allows criminality by pretending to control or moderate it.

... and you will see that there is no easy way out.

They wanted to make us believe in a sort of invulnerability of the system, residing in the virtuality, the mobility of its elements, a sort of Lerne’s Hydra, or Danaide’s barrel! In fact, it is becoming more and more clear that it is only enduring thanks to the passiveness, or even complicity, of the International Community.

Political and economic policy-makers speak at ease about tackling this phenomenon, however the speculated measures focus only on challenging the worst of the problems, perhaps only to satisfy public opinion. This comes back to allowing the system to remain, where the financial powers control all, because they can function without any real constraint. Effectively, they are reinforcing the system, pretending to correct its problems, when it is the actual foundations that should be challenged.

In brief, it is not a simple “off-shore” system that we have to deal with, and that we could “shut down”. Instead, it is a system “in-off”, linking what is legal, with what is not, the real and the virtual. The ‘real’, creating the ‘virtual’ when he likes, in order pretend to “shut it down” when he deems it necessary. Now we must challenge the ‘real’.

Invulnerability is a myth. The Achilles’ heel of the system is that the actors really cannot hide. They are too large and noticeable. Just because we are in a schizophrenic society, does not mean that we can pass through the looking glass. Only a poet can do it, and our racketeers really definitely could not be described as poets! These major actors are generally conspicuous transnational organisations, not individuals (let’s not however depreciate the responsibilities of individuals that lead these organisations).

Putting an end to these public difficulties

The system therefore reacts to demands of world leaders. These actors systematically function outside the law. But you could say that their innocence is also virtual - even more so than their havens. Consequences can be seen here in the objectives, and causal links are evident. Concerning objectives, one notes the counteraction of social, tax, penal and security laws, national laws and international conventions. In looking at the direct consequences of these objectives, it is generally financial aspects that are considered most important, but there are also many other things: the challenge of human rights, discrimination, proslavery, homicide and ecological disasters, criminality, private militarisations. Moreover, there can be serious crimes against humanity. If we look at possible excuses, we note ‘international competition’. And contained in all this, the organised irresponsibility of “legal” actors in the face of these problems prevents any others from assuming an active role.

From there, it appears clear that the overall principle of shady practices by these organisations is the negation of the most basic human rights, acquired by counteracting (as a matter of priority) national and international laws that guarantee human equality, liberty and dignity. We know of several cases in Africa, which provide us with concrete examples of this worrying practice. No call for “freedom of enterprise” or any other ‘right of ownership’ can justify such exemption from basic rights.

Solutions exist at all levels: local, regional and global. It is not a technical question. It is a question of political will and dialogue, since the system of ‘tax havens’ is worldwide, but still vulnerable at other levels. We have to make it disappear: here is the challenge for civil movements to put forward to politicians in their campaigns.

Creating public goods

Repression, and therefore dissuasion, is an endless task if not structured and organised (lack of organisation is what has allowed the development of such an appalling situation). It is necessary to create “public goods” on a global scale (the presence of which will prevent the return of the difficulties we are attempting to eradicate) around the emerging structure of universal civil rights, and equally put services into place, to allow the realisation of these goods.

The monetary movement was, and still is, the main vector of flows we are condemning, but it is also an essential aspect of the current (and future) global market. Can currency be described as a global public good? Do rights to finance and fair trade exist somewhere within this? If not, we really should invent them, through economic, social and cultural rights. Africa, more so perhaps than any other part of the world, should have these rights, including the right to reparations for the pillaging they have had to experience.

What are the means of global financial public services? First of all, the existence of parallel systems outside the confines of the law, thanks to this same law, and not even its absence. The creation of an actual system of control for banks, and linked to this, the need for public services and judicial transparency. For this, technical means are in easy reach, due to the fact that those people for who economic criminality bypasses the law, are often the same people who control it. Should our legal system still allow this scenario, and the means to maintain it? Mireille Delmas-Marty writes of this in the book “trois défis pour un droit mondial” (three challenges for global law).

At the other end of the scale (and at the base of everything), there is physical production. Energy, forests, certain mined resources (phosphates) are global goods that justify being defined as global public goods, implying global management with the need for public services that, far from opposing civil rights, will help them to encourage or even oblige their States to manage their riches. Global ecological management and sustainable exploitation of local resources should be able to co-exist happily.

At the base of everything too, is human work: the need to advance, and particularly to apply global public employment laws. The obligation to respect universal human rights, far from opposing civil rights, will help people to help or encourage their States to follow human rights, and international businesses to also respect them. At least then social incentives can and should be reversed.

In this new context, one can (and should) reorganise markets, trade rules, workings and protection of fragile economies... The right to solidarity, in the place of mean and badly distributed “aid”. The right too, to reparation and to the cancellation of debt... So much to do, so many goods to create, and to fight for! This could take a long time, but all the more reason to get to work without delay!

There are of course urgent matters, and one of the most basic (to mention it but one last time), is the reintegration of lawless worlds into lawful worlds. Here, the desired public good is simply Justice for everyone.

Translated by Lindsey PATERSON.

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